Biotech: When Good Drugs Go Bad

By

Ben Levisohn

Sept. 12, 2017 2:49 p.m. ET

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Biotechnology is a tough business, even when things go well, as every victory is just waiting for the next piece of data to turn it into defeat. Just ask Regeneron Pharmaceuticals (REGN), which was recently flying high on hopes for Dupixent, only to have competitor success cause its stock to tumble.

Following Sage's announcement, Chardan's Gbola Amusa has his I-told-you-so moment:

The brexanolone (SAGE-547) failure is consistent with our long-held thesis from our 24 May 2016 initiation. From our 24 May 2016 Sage initiation, "Initiate Sell (PT$18) on scant evidence SAGE-547 works better than old drugs", we took the view brexanolone was likely to fail in the phase III double-blind, placebo-controlled (DBPC) STATUS trial, since: 1) Sage lacked a phase I/II DBPC study to inform phase III design, 2) Sage had not produced convincing open-label phase I/II data, 3) the natural history in SRSE was not established enough to make positive conclusions on the open-label phase I/II trial, 4) the mechanistic logic for brexanolone as a differentiated GABAA-receptor modulator is modest, at best, and 5) brexanolone (i.e. allopregnanolone) is an old, widely-studied anti-epilepsy drug that works like other old, widely-studied anti-epilepsy drugs.

BMO's M. Ian Somaiya recommends buying Intercept on weakness:

We recommend buying ICPT on weakness, as the Dear Doctor letter addresses approximately 10 adverse events (AEs), which were caused by physicians not adhering to dose adjustments recommended for use in patients with hepatic impairment in the Ocaliva label. There are no new AEs cited in the letter and we therefore do not expect any changes to the product label. We continue to expect strong Ocaliva scrips in 3Q17 to translate to another potential beat and raise and Phase 2 PSC data (AASLD) to open a much larger opportunity for Ocaliva.

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